IPOs hit lowest level since 2008

2012 IN REVIEW

Lee Spears, Ruth David and Fox Hu

Published 7:48 pm, Tuesday, January 1, 2013

Photo: Zef Nikolla, Associated Press

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In this May 18, 2012 file photo provided by Facebook, Facebook founder, Chairman and CEO Mark Zuckerberg, center, rings the Nasdaq opening bell from Facebook headquarters in Menlo Park, Calif. Years of anticipation led to Facebook's initial public offering of stock in 2012, the hottest Internet IPO since Google's in 2004. Many of the 1 billion-plus users of the world's largest online social network craved a chance to buy in early. On the eve of its first trading day, Facebook's market value was $105 billion, yet the IPO bombed. (AP Photo/Nasdaq via Facebook, Zef Nikolla, File) less

In this May 18, 2012 file photo provided by Facebook, Facebook founder, Chairman and CEO Mark Zuckerberg, center, rings the Nasdaq opening bell from Facebook headquarters in Menlo Park, Calif. Years of ... more

Photo: Zef Nikolla, Associated Press

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Japan Airlines' $7.7 billion IPO in September was that nation's largest and boosted Asian offerings.

Japan Airlines' $7.7 billion IPO in September was that nation's largest and boosted Asian offerings.

Photo: Toshifumi Kitamura, AFP/Getty Images

IPOs hit lowest level since 2008

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Initial public offerings in 2012 slumped to the lowest level since the financial crisis as signs of an economic slowdown and Facebook's disappointing debut curbed demand and prompted companies to push back sales.

IPOs raised $112 billion worldwide in 2012, the least since 2008. Initial sales in western Europe dropped to one-third of 2011's level, while concern about China's economy helped cut proceeds in Asia by almost half. U.S. offerings raised $41 billion, little changed from 2011, as Facebook's IPO spurred a monthlong drought in U.S. deals.

With the uncertainty about possible federal spending cuts and tax increases weighing on the IPO market, the global backlog of potential offerings swelled to the largest year-end size since 2007. That could set the stage for a rebound if lawmakers avert the "fiscal cliff," according to Credit Suisse Group AG and Barclays PLC, with companies from China Petrochemical to ING ready to potentially move ahead with offerings.

"A lot of people have been very selective," Joe Castle, head of equities syndicate at Barclays, said at a briefing last month in New York. "If we see some deals go out early in the year that go well and trade well, then it feeds on itself for more volume to come out in the U.S. and on a global basis."

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European growth

In the fourth quarter, IPOs in Western Europe grew more than fivefold from a year earlier to $5.71 billion, and U.S. initial offerings increased 15 percent to $8.8 billion. First-time share sales in Asia fell by 46 percent to $10.9 billion. Globally, IPOs in the quarter edged up to about $32.4 billion from $29.5 billion in the same period a year earlier.

The annual global IPO tally declined for a second straight year as Europe slipped back into a recession, cutting the amount raised in the region by about two-thirds to $9.91 billion. In Asia, the biggest region for IPOs, proceeds fell by 43 percent to $46.7 billion. The U.S. total barely eclipsed 2011's mark, even including the $16 billion Facebook issue, the biggest technology IPO on record.

Pulling back

After Facebook fell as much as 32 percent in the first three weeks after it began trading in May, companies including Party City Holdings and American International Group's airplane-leasing unit pulled planned offerings in favor of private sales.

The global IPO backlog swelled to about $115 billion at the end of the year, including a sale by Japan Post Holdings Co. planned for 2015, according to Ipreo, a New York provider of market data. Excluding that offering, the backlog would be about $65 billion, larger than the $52 billion a year ago, the data show.

Unease on the part of companies and investors may give way to an increase in new-share sales as a possible rise in mergers and acquisitions leads to more fundraising for strategic takeovers, according to Alasdair Warren, co-head of investment banking in Europe at Goldman Sachs Group. Worldwide, the number of mergers and acquisitions in the fourth quarter rose to the highest level since 2008 as companies started to draw on cash piles totaling more than $3.5 trillion to make acquisitions.

In Europe, the fourth quarter was 2012's busiest for IPOs, picking up even after the region's economy contracted for the second quarter in a row during the July-September period. IPOs in Europe since 2007 haven't managed to recover to even half of their pre-crisis level, as concerns over sovereign debt across the region have persisted.

"As cash-strapped governments in Europe look for ways to create new capital, more state-owned entities will come to market next year to repay government debt and reinvest in new assets," said Maria Pinelli, global vice chairman at Ernst & Young in London, who oversees the firm's IPO advisory business.

Separately, ING U.S., an insurance unit of the largest Dutch financial-services company, filed for a New York IPO in November. Its parent company, ING Groep, was ordered by the European Union to sell insurance operations, its U.S. online bank and a Dutch mortgage lender before the end of 2013 as a condition for approval of a 2008 bailout.

Asia slowing

Slowing growth in China for a seventh straight quarter hampered Asia's IPOs, even as People's Insurance Co. (Group) of China Ltd. raised $3.6 billion in a Hong Kong initial sale last month. Companies raised $5 billion in Hong Kong in the last three months of the year, down 24 percent from the same quarter in 2011, while deals in China in 2012 reached $15 billion, down 64 percent.

Japan's biggest IPO last year helped narrow the region's loss of deal volume. Japan Airlines raised $7.7 billion in September, bringing Asia's value of initial sales to just over half the amount raised in 2011.

Elsewhere in Asia, Malaysia's IPOs raised $6.5 billion in 2012. About half of that was the May debut by palm-oil maker Felda Global Ventures Holdings. Malaysia's economy is set to expand 4.8 percent this year, nearly double the anticipated global rate of 2.45 percent, according to economists surveyed by Bloomberg.

Year-end rise

The amount of money raised in IPOs globally the past quarter was about 44 percent greater than in the previous three months. The quarterly proceeds were boosted by a combined $2.3 billion of oil and gas IPOs that Credit Suisse led, helping the bank surpass JPMorgan Chase & Co. for the year's biggest share of U.S. IPO underwriting for the first time since at least 1999.

Morgan Stanley was the top global IPO underwriter for the third straight year in 2012, beating JPMorgan after helping lead the Japan Airlines IPO.

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